Friends,
Something very exciting is happening in America right now. News just broke this week that a record 4.3 million workers quit their jobs in August, which amounts to a shocking 3 percent of the total workforce. The wave of resignations was led by workers in the food service and retail industries, and it is utterly unlike anything we’ve ever seen in the job market before. (Unfortunately, economists have only been tracking the number of employee resignations since 2000, so the data set is just two decades long.)
So now economists and cable-news pundits are left with the million-dollar question: why are workers quitting in unprecedented numbers? We have to assume, given the trends that we’ve seen throughout the pandemic, that some of those workers are parents (and, unfortunately, mostly mothers) who are unable to either access or afford child care for their young children. And obviously, given the fact that many of these resignations are for public-facing jobs, many of those workers are simply unwilling to work under the abusive and dangerous conditions caused by the pandemic.
But a growing body of evidence proves that Americans won’t work for low wages and sub-par benefits anymore. Look at the recent spate of strikes in the snack-food industry and the ten thousand workers striking at several John Deere factories—the biggest strike in America this year, and the first strike at John Deere since 1989. It’s taken a global pandemic and a year of economic pain, but American workers are finally beginning to realize that they are not being paid what they deserve. Their employers are bragging about millions of dollars in profits every quarter and they’re only seeing annual wage increases of nickels and dimes—if they’re lucky enough to get raises at all.
For years, progressive economists have warned that American workers are underpaid. Over the past 40 years, American worker productivity has skyrocketed while their wages have remained stagnant. Inequality has grown so much that the average American worker’s paycheck should be tens of thousands of dollars more every year, had inequality not exploded. These strikes and resignations are what happens when the American worker finally stands up and demands to be paid what they’re worth.
If I were an elected official right now, I’d be figuring out what I could do to support these workers. Raising wages and supporting unions should be at the forefront of our leaders’ minds. This is the next great movement in American economics, and politicians who aren’t in front of these workers will be in danger of falling underfoot as this movement continues.
The Latest Economic News and Updates
Yes, Prices Are High. No, It’s Not 1970s-Era Inflation.
“The latest inflation reading shows that prices rose by 5.4 percent on an annualized basis in September as supply chain bottlenecks, worker shortages and high demand kept prices rising,” writes Ben Popken at NBC News. Food and shelter prices rose fastest, with gasoline and new car prices also climbing. Clothing prices fell sharply.
As a result of these high prices, Social Security’s cost-of-living adjustment next year will be the highest in nearly 40 years—5.9 percent. ABC News says this “amounts to an added $92 a month for the average retired worker,” which is “an abrupt break from a long lull in inflation that saw cost-of-living adjustments averaging just 1.65% a year over the past 10 years.”
This is the latest piece of news that will cause inflationary freakouts across the media. The past year has seen trickle-downers use inflation as an excuse to promote their hobby-horses: slashing spending, cutting taxes for corporations and the wealthy, and shrinking government. Of course, those three suggestions are the exact opposite of what the economy needs right now, and pursuing them would stall the recovery for the foreseeable future. (But they’d be great for a handful of wealthy elites.)
If you’d like to do a deep-dive exploration of what’s actually causing the current wave of price increases, J.W. Mason and Lauren Melodia published a great paper at the Roosevelt institute. They argue that rising prices are caused by supply chain problems and other pandemic-inspired disruptions and not an overheating economy. If you look at the other factors that traditionally lead to inflation, they’re well within the range of normal levels.
This means we can’t treat this inflation the way we have dealt with inflationary increases in the 1970s and 80s. The economy is not running too hot, and to try to slow the economy down by raising interest rates or promoting austerity measures now would only trip up the march toward increasing wages that Americans have made over the last few months.
Instead, our leaders should be working as hard as they can to repair the supply chain and bring the transportation and energy sectors back to their pre-pandemic levels. It’s a positive development that President Biden is calling on the Port of Los Angeles to take up a “90-day sprint” to unload container ships and eliminate the bottleneck of incoming goods before the Christmas rush really gets underway. By focusing directly on the root causes of these price increases, Biden is doing much more to combat this current wave of price increases than any wave of budget cuts ever could.
Less Talkism, More Deliverism
David Dayen at the American Prospect correctly recognizes what this moment in American politics needs: He calls it “deliverism,” a term he borrowed from journalist Matt Stoller. “Deliverism means governing well and establishing a record that the electorate needed to win actually feels,” Dayen writes.
In other words, people need to see concrete examples of good governance from Democrats before the midterm elections in 2022. If checks don’t get mailed and infrastructure doesn’t get built before then, the people will turn on the Democratic Party in a potentially disastrous change election.
This might sound simple, but the Congressional quagmire of the last few weeks has been a dispiriting reminder that some of our leaders will sometimes go out of their way in order to not govern. Passing the full Build Back Better Act into law would immediately begin to get America back to work in significant, meaningful ways, and that’s exactly what Democrats need to do if they want to fend off the next Trump uprising and stay in power.
New Report Proves Racism in the Paycheck Protection Program Loan System
Stacy Cowley at the New York Times reports on a new study which found that Black-owned businesses were much more likely to be denied Paycheck Protection Program loans from banks last year.
“The majority of Black borrowers who received aid from the $800 billion relief program got their loan from a financial technology company, not a bank,” Cowley writes. “The skew toward those so-called fintechs was far sharper among Black borrowers than any other racial group.”
The automated vetting programs of the online fintechs assessed the financial documentation of the Black business owners. But when bankers were face-to-face with these same Black business owners, and presented with the exact same financial documentation, they denied the PPP loans that fintechs approved. The difference seems to be that the banks took race into account and the fintechs didn’t.
One of the researchers’ conclusions is especially dispiriting: “There are times where there may be real benefits to removing humans from the process,” she told the Times. Perhaps if algorithms can be trusted to remove racism from the banking process, more banks should adopt an automated loan approval system.
Tax Reform Is on the Way
The Biden Administration wants to give the IRS more resources and powers to catch tax cheats, estimating that cracking down on wealthy and powerful offenders would bring in some $7 trillion—yes, that’s a “t”—in revenue.
Of course, banks and wealthy people are pushing back on the plan, with some complaining to the New York Times that a call for banks to report activity of more than $600 in transactions to the IRS would be an invasion of privacy. (A specious argument, given that the IRS already knows how much every citizen earned from every single job they’ve held in a given year.)
The goal of the reporting system isn’t to spy on individual payments, but rather to spot “large discrepancies between the income people and businesses report and what they have in the bank.” Expect to hear a lot of fear-mongering about this proposal from the banking lobby in the weeks to come.
The Biden Administration has already successfully promoted another type of tax reform, and this policy will have tremendous effects worldwide. American officials helped spearhead a move to establish a global minimum tax, which was approved by 136 nations including the United States.
This would mean that nations like Hungary and Ireland, which for decades have provided shelters for international corporations to evade taxes, will finally have to levy a minimum 15 percent tax on companies that earn more than 750 million Euros a year.
It’s hard to imagine how far-reaching the consequences of this policy might be. Once corporations are held to a global minimum standard, local investments are likely to soar. At one time, the idea of a worldwide policy like this seemed impossible, but it seems now that the international community is finally ready to address the flaws of open-border trade policies like NAFTA that simply extracted money from communities and dumped them in international safe houses. This policy could significantly change the world for the better, and it’s flying under the radar of most media outlets.
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.
Join Jessyn and I for Civic Action Live on Friday morning at 10:30 am, where we’ll discuss why American workers are enjoying more power than they have in decades and why supply chain issues are the latest panic among trickle-downers.
In this week’s episode of Pitchfork Economics, Goldy interviews the impressive Stacy Mitchell, co-director of the Institute for Local Self-Reliance, about how corporate concentration hurts the economy. Mitchell and Goldy discuss how rural America’s wealth has been siphoned out of unpopulated areas and into a few concentrated wealthy areas, and they explore how our leaders can encourage small business growth and combat this monopolization of our economy through antitrust regulations.
And in his Business Insider column, Paul explains how super-wealthy people use philanthropy to whitewash their reputations and to argue against taxation, when in fact taxing the rich would do far more good for society than any wealthy philanthropist could ever do.
Closing Thoughts
In 1994, economists David Card and Alan Krueger published a groundbreaking study on the minimum wage which proved what a few economists had suspected for some time: Despite what the trickle-down conventional wisdom claimed, raising the minimum wage did not kill jobs. Politicians on the left and the right had claimed for decades that every time the wage goes up, job growth declines and more people are out of work.
For their trouble, Krueger and Card were lambasted by the mainstream economic establishment. Arch-conservative economist James Buchanan, a winner of the 1986 Nobel Prize in Economics, slammed the duo as “a bevy of camp-following whores” in the Wall Street Journal, sniffing that “no self-respecting economist would claim that increases in the minimum wage increase employment.”
Buchanan, and the majority of economists at the time, were dead wrong. Card and Krueger’s was the first academic study that reflected the truth about the minimum wage: When workers have more money, they spend that money in local businesses, which then have to hire more workers to deal with the increased consumer demand. In the years since, study after study has confirmed and elaborated on the findings of Krueger and Card’s excellent work.
And this week, David Card was finally rewarded with a much-deserved Nobel Prize in Economics of his own. This is a big deal. (Alan Krueger, unfortunately, passed away in 2019.)
Noah Smith, on his excellent Noahpinion Substack, argues that this Nobel recognition marks the moment when economics finally embraces science. With all respect to Smith, I think it’s even bigger than that—the Nobel Committee’s correction of the record marks a refutation of Buchanan’s absurd philosophies and signifies the moment when trickle-down orthodoxy finally lost its grip on mainstream economics.
The data prove that prosperity doesn’t trickle from the top down, and that economies are built from the middle out. Finally, a quarter of a century later, Krueger and Card’s work has been fully vindicated.
Be kind. Be brave. Mask up. Get vaccinated.
Zach